Pullbacks can occur for a variety of reasons. As a result of prevailing brand and market emotions, the majority of equities with an average history of upward price movement see their values fall. Whenever a hoax or hidden insolvency is revealed, or when news of persistent revenue loss surfaces, many investors sell their shares in that company. As a result, the brand’s stock price falls. Such events are common in the commodities market, most notably in gold and oil prices.

Pullbacks in the stock market are temporary drops in an asset's typically rising price. Keep in mind that the dip should be brief; if it continues to fall without recovering, it becomes a reversal.

Pullback trading is a strategy where traders look for a temporary price reversal within a larger trend. In an uptrend, traders wait for the price to "pull back" to a support level before buying, anticipating that the trend will resume. Conversely, in a downtrend, traders look for the price to "pull back" to a resistance level before selling. This approach aims to enter trades at a better price within the trend, maximizing profit potential and minimizing risk. Key tools for identifying pullbacks include moving averages, trendlines, and Fibonacci retracement levels, which help traders determine optimal entry points.